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The answer to the age-old question of whether to go long or short on your mortgage is unclear yet again.

The popular variable-rate product tied to prime that helped people buy a lot more house with more debt is going up. The prime rate at the major banks, which tracks the Bank of Canada’s rate, is now at 2.75%.

At 2.05%, a variable-rate product today may look as attractive as ever, but the five-year fixed-rate closed mortgage is falling fast. It can now be had for under 4%.

Bank of Montreal senior economist Sal Guatieri does agree that variable-rate products have worked out better than fixed-rate mortgages throughout history, but says the tide may be turning.

Bank of Montreal is forecasting another 25 basis point move in September and says rates will climb another 1.5 percentage points by the end of 2011. If Mr. Guatieri and others are right, by 2012, the variable-rate products out today would clock in at just above 3.75%, if the discounting remains the same.

“If you are still in that variable-rate product then, you’d have to sweat out the next three years because there would still be possibly more increases,” says Mr. Guatieri, who adds his bank sees the overnight rate eventually going to 4% in the following three years. Based on the present gap between the Bank of Canada and prime, that would place the variable-rate product you get today at 6% by around 2015.

Fears of such a scenario are driving people into fixed-rate products again. That, plus new mortgage rules that make it easier to qualify for a mortgage if you go for a fixed-rate product with a term of five years or longer.

For updated rates and more information on the right mortgage for you please visit www.designermortgages.ca/rates.htm or call 1-866-824-8057

Source: Garry Marr, Financial Post • Tuesday, Jul. 27, 2010

Financial Post · Wednesday, Jun. 30, 2010

OTTAWA — Home prices in some of Canada’s biggest cities rose 0.8% in April, according the latest Teranet-National Bank house-price index released Wednesday.

That followed a 0.3% rise for March, and marked the 12th straight month that prices have risen.

“At the national level, April continues the best string of consecutive monthly price increases since September 2006,” Marc Pinsonneault, economist with National Bank Financial, wrote in a report. “Home prices are now 2.9% above their recession peak, a situation that contrasts with the one prevailing in the U.S., where prices are down 30% from their peak.”

The index takes into account price trends in six urban areas. Prices in Halifax were up 1.9% for the month, Montreal and Ottawa home prices were ahead 1.1%, Toronto was up 0.6%, and Calgary and Vancouver were both ahead 0.8%.

It marked the first time in five months all local areas saw monthly gains. Calgary, however, remains the only area among the six still short of its pre-recession high, which it achieved in August 2007.

For the year, the national composite home price index was up 12.9%.

Canwest News Service

As a result of stubborn inflation and stronger then expected economic growth signs are becoming more clear that Canadians could be seeing interest rate hikes sooner then previously anticipated.

Bank of Canada’s Mark Carney did not directly state that higher rates were on the way however, he did issue his clearest indication to date that his year-old commitment to keep the policy rate at the record 0.25 per cent until July was “expressly conditional” on inflation remaining tame.

In a speech to a business audience, the bank governor noted that both underlying core inflation and economic growth have grown slightly stronger, although broadly proceeding as expected.

The tip-off to economists was that he changed his language on his conditional commitment on interest rates, which has led to historically low rates for both consumers and businesses in Canada and helped the country recover from recession.
“This commitment is expressly conditional on the outlook for inflation,” he told the Ottawa Economic Association.
It was the first time Carney has undercut the commitment in such pointed language.

“They still have considerable latitude, but the changes that would be required to their forecast are consistent with hiking rates sooner than markets are anticipating,” said Derek Holt, Scotiabank’s vice-president of economics. He said Carney may move as early as June 1.

But Holt stressed that Carney’s overall message to Canadians is that rates will remain low by historical standards for some time.
“No matter what, we emerge from this with lower rates at the end point of the hiking campaign than in past cycles. He’s saying the outlook is clouded with risks and there’s a number of reasons to expect growth to be lower than past cycles.”

For more interest rate information contact Verico Designer Mortgages Inc.

Source: Julian Beltrame, The Canadian Press

Bond yields usually rise on good economic news and last week was no different. The 5-year bond yield jumped 0.14% on strong jobs data from both sides of the border.  (Canadian Jobs Report / U.S. Jobs Report)

Canada added 79,100 jobs in November. Traders had expected only 15,000.
With rebounding yields, fixed mortgage rates will probably halt their drop, at least for the time being.  As of now, discounted 5-year fixed rates are just under 4%—well below the approximate 10-year average of 5.36%.

The 5-year yield, which influences fixed mortgage rates, now stands at 2.53%.  It seems to be putting in a floor in the 2.35% to 2.40% range.  It may be tough to penetrate that floor in the near-term without weaker economic news, or some other economic shock.
The Bank of Canada holds its last interest rate meeting of the year on Tuesday. 19 of 19 economists polled by Bloomberg predict no change to the Bank’s 0.25% overnight rate.
Nevertheless, analysts will be watching to see if the BoC surprises the bond market with any optimistic outlooks.
For more market news contact Charmaine at 1.866.824.8057

Canadians are confident that home values are increasing and are optimistic about local housing markets, the Canadian Association of Accredited Mortgage Professionals said in a report.

An October survey conducted saw citizens reply with an average score of 6.56 out of 10 when asked if this was a good or bad time to buy a home in their community, said the report, released yesterday.

Citizens are also “highly satisfied” with the terms of their mortgages, it said. For those who renewed or refinanced a mortgage in the past 12 months, the average new rate was 1.12 percentage points lower than the previous one.

With interest rates at a low it is a great time to see if it is worth your while to switch to a new rate.

Source: Carla Wilson, Times Colonist

For any information call Charmaine Idzerda at 1.866.824.8057

The simple fact of renewals is this: nearly 60% of people sign back renewal letters without even taking the time to see what else is available. As a result, there is little or no incentive for the financial institution to give their best offer. What makes things even more interesting is the fact that renewal letters usually only arrive about two to three weeks before the mortgage is actually up for renewal. This two to three weeks gives you very little time to arrange financing with another lender, or to take advantage of the lower rates that may have occurred in the three to four months before your renewal date.
Consumers should be pre-approving their renewals 90-120 days prior to their actual renewal date. This immediately gives you the benefit of the lowest rate on the market for the longest period possible before your renewal date. What makes this better is the fact that this is completely free and without obligation.
A mortgage is too big a financial decision to not take seriously.  It makes sense to place your mortgage with the institution that gives you the best rates and service.

Using the services of a mortgage broker who shop’s the market to obtain the best rate and terms makes a lot of sense!
For more information about obtaining a mortgage renewal please call Charmaine at Verico Designer Mortgages Inc. Toll Free: 1.866.824.8057

* TSX -248.21 to 10,805(Reuters) every stock market in the world was down yesterday on doubts about the strength of the US economic recovery. TSX closed to its lowest level in 2 months dipping below the 11,000 pt mark

* DOW -119.48 to 9,762 dipped below 10,000 pts as sales of new US homes fell 3.6% last mth against an expected 2.6% rise

* Dollar -1.08c to 92.72 fell to its lowest level in 3 weeks influenced by a dip in oil prices

* Oil -$2.09 to $77.46US per barrel.

* Gold -$4.80 to $1,034.70USD per ounce

* Canadian 5 yr bond yields -.03bps to 2.70. four weeks ago the yield was 2.57%.  This is the rate that effects the fixed interest rates

* http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us

Article from US Mortgage Brokers Association

OTTAWA, Ontario, October 20, 2009 — The Bank of Canada held its benchmark overnight lending rate steady at 0.25 per cent at its setting on October 20th, 2009. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, remains at 0.5 per cent.

The Bank acknowledged that recent indicators point to the start of a global recovery, and that economic and financial developments have turned more favourable than it had previously expected.

In its September announcement to hold interest rates steady, the Bank forecast that inflation would return to its two per cent target in the second quarter of 2011. The Bank has now moved that date out to the third quarter of 2011.

The Bank’s commitment to keep interest rates on hold until the second half of next year is conditional on the outlook for inflation. Since inflation is not expected to pick up sooner than it previously expected, the Bank repeated its commitment to keep interest rates on hold. “Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.”

The Bank pointed to the rapid rise in the Canadian dollar in recent weeks as a risk to the Canadian economic recovery, saying “Heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures.” The Bank now expects that the domestic economy will be a greater source for economic growth, at the expense of weaker net exports.

“The Bank threw cold water on recent speculation that it may raise interest sooner rather than later,” said CREA Chief Economist Gregory Klump. “By highlighting the recent rapid rise in the Canadian dollar while intentionally failing to mention the rebound in the Canadian housing market as sources for concern, the Bank aimed to end recent speculation that it will hike rates before its repeated pledge of not doing so until at least July 2010.”

As of October 20th, the advertised five-year conventional mortgage rate stood at 5.84 per cent. This is down 1.36 per cent from one year earlier, but stands 0.35 per cent above where it stood when the Bank made its previous interest rate announcement on September 10th.

Improving credit market conditions have enabled lenders to reintroduce discounts off posted mortgage interest rates. Discounts of up to a percentage point can be negotiated, depending on lender-broker relationship.

News source: The Canadian Real Estate Association (CREA)

Source: Eric Lam 07/10/2009 National Post

 

Household credit is “defying gravity,” growing at the fastest pace of any recession since the Second World War when adjusted for inflation, a new report from CIBC World Markets shows.

A booming real-estate market that has sent outstanding mortgages surging 7.8% year-over-year in August is the primary driver, accounting for almost 70% of the 7% increase in overall household credit, said Benjamin Tal, senior economist at CIBC World Markets.

That is in stark contrast to the 1991 and 2001 slumps, when mortgage growth ground to a halt on an inflation-adjusted basis, the report notes.

“During a recession, usually mortgage markets go down, but this time it hasn’t and the reason is affordability, driven by low interest rates,” Mr. Tal said. “The Bank of Canada cut interest rates to stimulate the economy, and it’s working.”
Debt interest payments as a share of disposable income at 7.7% are also at their lowest point since 2006. In the 1991 recession, this ratio was more than 10%.
Craig Alexander, deputy chief economist with TD Economics, said a major part of the real-estate boom comes from pent-up demand as nervous Canadians started to realize this spring that the recession was not as bad as once feared.
“People were [also] responding to mortgage rates that are too good to last, so it’s stealing some of the 2010 sales,” he said. About half of that trend has already been absorbed, he said.

“Canada is in a unique situation where we are in the best position to provide credit and Canadians are in the best position to accept that credit,” Mr. Tal said. “It’s almost a crime not to take advantage of it. But we have to do it in a responsible way.”

Neither Mr. Tal nor Mr. Alexander see the current pace of growth in real estate continuing because the Bank of Canada will step in and raise interest rates if the real-estate market runs out of control.

 

Many homeowners are utilizing the equity they’ve accumulated in their homes to tap into Home Equity Loans or Home Equity Lines of Credit, sometimes referred to as a HELOC. You can use the equity in your home for many different reasons, to name a few:

 • With the Home Renovation Tax Credit and the Eco-Energy Rebates, now would be a good time to make those renovations you’ve been thinking about! You would also be adding to your homes’ value, an all around win-win situation

 • If you’ve been feeling the pinch financially and are not feeling completely secure, now would be a good time to come up with a debt consolidation plan. The lower interest rates from the LOC makes payments manageable. 
 • If you feel your business could use a little boost now that the economy is starting to recover, and you want to be ready, consider the benefits of the LOC; with it’s flexible terms, you can pay it off quickly when your business is back on sound footing.
• If you’re generally good with money, a HELOC can provide a place to go for emergency funds from time to time, especially if you know you’re going to be diligent in paying it back.
Home equity is the difference between the current appraised value of your home and the amount you have paid on the first mortgage.

In these days of low interest rates, it doesn’t make sense to be paying credit card or unsecured line of credit charges. Please call Verico Designer Mortgages Inc to find out about the equity in your home and the options available to you.